Financial Data and Key Metrics Changes - The company reported Q1 2023 sales of $627.2 million, a decrease of 0.7% compared to Q1 2022, with core sales declining by 2.4% [53][56] - Adjusted EBITDA margin declined by 150 basis points to 18.2% compared to Q1 2022, primarily due to lower volumes and increased interest expenses [11][56] - Adjusted diluted EPS was $0.38, down from $0.47 in the same period last year [56] Business Line Data and Key Metrics Changes - Core revenue in the Specialty Products & Technologies segment grew by 3%, with the Orthodontics business growing over 12% [34][56] - The Equipment & Consumables segment saw core sales decrease by 11.7%, attributed to a slowdown in equipment volumes and a modest decline in consumable sales [57] - The implant business experienced a low single-digit decline, negatively impacted by challenges in China and Russia [34][56] Market Data and Key Metrics Changes - Demand in China was significantly down in early Q1 due to COVID-related slowdowns but began to recover in March [15][26] - Outside of China and Russia, other markets showed mixed results, with double-digit growth in emerging markets and high single-digit growth in Europe [15][32] - The company noted that the traditional imaging business in North America declined mid-single digits, affected by high exposure to capital equipment [33] Company Strategy and Development Direction - The company is focused on long-term strategic priorities, including accelerating organic growth, expanding operating margins, and transforming its portfolio [21][22] - Investments are being made to enhance operational capabilities and improve productivity through the Envista Business System (EBS) [22][39] - The company aims to build a stronger, differentiated, and growth-oriented portfolio while pursuing disciplined capital deployment [30][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth of the dental market, despite short-term uncertainties due to higher interest rates and geopolitical risks [25][27] - The company anticipates core sales growth to accelerate throughout 2023 as China stabilizes and benefits from acquisitions are realized [63][64] - Management expects to achieve over 20% adjusted EBITDA margins for the full year, with margin expansion anticipated as the organization streamlines operations [29][63] Other Important Information - The company hosted over 1,600 dental professionals at the Envista Summit, focusing on training and introducing advancements in dental care [28] - The DEXIS IOS and Osteogenics acquisitions are expected to contribute significantly to core growth in 2023 [52][59] Q&A Session Summary Question: Update on China and North America performance - Management noted that patient demand in China improved significantly in Q2 compared to Q1, with dental offices reopening and increased patient comfort seeking care [67] - In North America, the company is addressing execution challenges in the implant business and expects improved performance as operational issues are resolved [70][87] Question: Performance of the Spark Aligner business - The Spark Aligner business has seen over 70% year-over-year growth, with a record number of active new doctors added [49][109] Question: VBP program impact - The VBP program in China is expected to have a $20 million impact on the business in 2023, with initial indications showing a positive effect on long-term patient demand [27][97] Question: Equipment & Consumables segment performance - The Equipment & Consumables segment has faced challenges, but management is confident in long-term profitability improvements through strategic shifts and operational enhancements [101][118] Question: Outlook for the remainder of the year - Management reaffirmed guidance for low single-digit growth and improved margins throughout the year, despite ongoing macroeconomic uncertainties [119][120]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR Securities Registered Pursuant to Section 12(b) of the Act: | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common stock, $0.01 par value | NVST | New York Stock Exchange | Indicate ...

Sales Performance - Specialty Products & Technologies accounted for 62% of total annual sales in 2022, up from 60% in 2021 and 58% in 2020[58]. - Emerging markets generated $563 million in sales in 2022, a significant increase from less than $30 million in 2011[51]. - The company generated 51% of its sales from markets outside of the U.S. in 2022, highlighting its global commercial reach[56]. - In 2022, 53% of sales were generated in North America, 20% in Western Europe, 22% in emerging markets, and 5% in other developed markets[73]. - Sales increased by 2.4% year-over-year, with core sales rising by 4.1% for the year ended December 31, 2022, despite a 3.5% negative impact from foreign currency exchange rates[302]. - Total sales for the year ended December 31, 2022, were $2,569.1 million, representing a 2.4% increase compared to $2,508.9 million in 2021[314]. Product Development and Innovation - The company has invested in its Specialty Products & Technology segment, adding manufacturing capacity and personnel, with further investments planned for 2023[46]. - The company has launched several new products in its Orthodontic Solutions business, contributing meaningfully to overall sales in the segment[51]. - The DTX software suite, integrating treatment planning and imaging, enhances clinical workflow efficiencies and outcomes[62]. - Spark clear aligner system, launched in multiple markets, is designed for mild to complex malocclusion and features advanced material for efficiency and aesthetics[66]. - The company launched over 30 new products since the acquisition of Nobel Biocare in 2014, including comprehensive software packages for dental treatment planning[62]. - The company is actively pursuing new product launches and commercial investments as part of its growth strategy, focusing on expanding the use of existing products and technologies[286]. Market Trends and Growth Drivers - The global dental products market is expected to grow due to an aging population, with nearly 1 billion people aged 60 or over in 2020, projected to double by 2050[55]. - The growth of Dental Service Organizations (DSOs) is expected to drive increasing penetration and access to dental care globally[55]. - The demand for dental procedures is expected to grow due to factors such as an aging population and increasing access to complex procedures[289]. - The implant industry enjoys higher margins and growth than the overall dental products market, with significant growth expected in the U.S. and Greater China[52]. Financial Performance - Operating profit for 2022 was $319.2 million, a 4.2% increase from $306.2 million in 2021, with an operating profit margin of 12.4%[314][323]. - Gross profit margin improved to 57.4% in 2022 from 56.9% in 2021, driven by increased sales volume and pricing[320][321]. - Net income for 2022 was $243.1 million, a decrease of 28.6% from $340.5 million in 2021[314]. - Operating profit margin increased to 17.8% for the year ended December 31, 2022, compared to 15.4% in 2021, driven by higher sales prices and a favorable product mix[340]. Challenges and Risks - The ongoing COVID-19 pandemic has led to a decrease in sales in certain markets, particularly in China, due to lockdowns and subsequent increases in infection rates[284]. - The company is facing challenges related to pricing transparency and reimbursement reductions from third-party payors, which could impact product demand[116]. - Regulatory scrutiny over product pricing has intensified, with various legislative efforts aimed at increasing transparency and controlling costs[115]. - Supply chain disruptions and labor shortages continue to pose challenges, impacting the ability to reliably produce and ship products[294]. - The Russia-Ukraine conflict has not materially impacted the company's financial position as of December 31, 2022, but poses risks related to market access and supply chain disruptions[285]. Human Capital and Corporate Governance - As of December 31, 2022, the company employed approximately 12,700 persons, with about 3,000 in the U.S. and 9,700 outside the U.S.[84]. - The company maintained 99% gender pay equity and 99% race/ethnicity pay equity in the U.S. in 2022[86]. - The company achieved a 91% participation rate in its employee engagement survey, with 78% of respondents feeling engaged at work[91]. - The company’s Board of Directors reviews human capital matters quarterly, focusing on talent acquisition, retention, and diversity initiatives[85]. Research and Development - Research and development investments are expected to continue at a rate consistent with past practices to maintain competitive positioning and enter new markets[80][81]. - The company has invested approximately $287.3 million in research and development (R&D) since 2020, emphasizing its commitment to product innovation and development[286]. - Research and development expenses were $100.1 million, consistent with 2021, representing 3.9% of total sales[323][324]. Cash Flow and Financing - Net cash provided by operating activities was $182.7 million in 2022, down from $361.6 million in 2021, primarily due to lower net income and higher incentive compensation payouts[345]. - Net cash used in investing activities was $657.3 million in 2022, compared to $262.7 million provided in 2021, largely due to acquisitions and increased capital expenditures[347]. - Net cash provided by financing activities was $12.5 million in 2022, a significant improvement from $465.6 million used in 2021, attributed to the repayment of a Euro Term Loan Facility[349]. - The company had the ability to incur an additional $750 million of indebtedness under its revolving credit facility as of December 31, 2022[351]. Compliance and Regulatory Matters - The company is subject to multiple data privacy and security laws, including HIPAA and GDPR, which impose significant compliance requirements and potential penalties for violations[123][119]. - Compliance with the EU Medical Device Regulation (EU MDR) required modifications to the company's quality management systems and additional resources[110]. - Compliance with state and federal data breach notification laws is critical, as violations can lead to significant legal and financial repercussions[121]. - The company is required to adhere to various export/import control laws, which may affect its operations and transactions[128].

Fourth Quarter 2022 Earnings Presentation February 8, 2023 Forward Looking Statements Q4 2022: Financial Metrics Certain statements in this press release are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking stateme ...

Financial Data and Key Metrics Changes - For the full year 2022, core sales growth was up 4.1% with an adjusted EBITDA margin of 20.1%, representing a 40 basis point expansion over 2021 [8][24] - Fourth quarter sales increased 1.4% to $660.8 million, with core sales growth of 2.3% compared to Q4 2021 [30][33] - Adjusted EPS for Q4 was $0.52, a 13% increase year-over-year from $0.46 [33] Business Line Data and Key Metrics Changes - The orthodontics business saw over 15% core growth in 2022, driven by the Spark aligner system [16][34] - Specialty Products and Technology segment had a core revenue increase of 4.5% in Q4, while the Equipment and Consumables segment saw a 0.9% decline [33][37] - The implant-based tooth replacement business experienced solid mid-single-digit core growth in 2022, despite declines in China and Russia [22][35] Market Data and Key Metrics Changes - Developed markets grew 3.5%, with strong growth in Western Europe, while China and Russia saw significant declines [31] - Emerging markets grew low-single-digits, with China and Russia experiencing double-digit declines in Q4 [31][34] - The adjusted gross margin for Q4 was 56.2%, a decrease of 90 basis points year-over-year, primarily due to inflation and strong growth of Spark [31] Company Strategy and Development Direction - The company aims to accelerate growth, expand operating margins, and transform its portfolio through disciplined capital deployment [49][50] - The focus remains on being a leader in orthodontics and implant-based tooth replacement, leveraging premium offerings and digital capabilities [50][51] - The company is committed to continuous improvement and customer-centric culture, utilizing the Envista Business System (EBS) to drive productivity and operational efficiency [14][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects of the dental market, despite short-term headwinds from economic uncertainties and geopolitical risks [11][46] - For 2023, the company expects low-single-digit core growth and adjusted EBITDA margins over 20%, with an anticipated acceleration in growth as China stabilizes [47][48] - Management highlighted the importance of monitoring patient traffic and appointment bookings, indicating resilience in patient demand but acknowledging potential volatility [12][46] Other Important Information - The company generated free cash flow of $95.1 million in Q4 and ended the year with over $600 million in cash [42][43] - Significant investments were made in long-term growth initiatives, with a focus on optimizing organizational structure to improve customer experience [25][43] Q&A Session All Questions and Answers Question: Health of the dental consumer in the U.S. and Europe - Management noted that patient demand remains resilient, with consistent bookings and patient traffic in specialty businesses, despite challenges in China and Russia [56] Question: Magnitude of VBP headwinds on EBITDA margin - Management indicated that VBP is expected to have a headwind of about 35% on pricing, which will likely be dilutive for the duration of 2023 [61][64] Question: Underlying trends in the first quarter - Management reported continued expansion of the Spark business and solid performance in implant sales outside China and Russia, while noting challenges in those regions [70][72] Question: European growth sustainability - Management expressed confidence in sustained growth in Western Europe due to systematic execution and strong relationships with orthodontists, beyond just DSO wins [81][87] Question: Share gains versus pricing in consumables - Management highlighted that the growth in the consumables business is driven by both share gains and targeted pricing strategies, with expectations for continued mid-single-digit to high-single-digit growth [92]

J.P. Morgan Healthcare Conference Amir Aghdaei President & CEO @ Envista Certain statements in this presentation are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, among other t ...

Financial Data and Key Metrics Changes - Reported sales for Q3 2022 increased by 3.9% to $631.1 million, negatively impacted by 4.1% due to foreign currency exchange rates [34] - Core sales growth was 4.9% year-over-year, reflecting solid performance in Specialty Products & Technologies, offset by weakness in Equipment and Consumables [35] - Adjusted gross margin was 59.2%, a 40 basis point increase compared to the prior year, while adjusted EBITDA margin was 20.2%, approximately 60 basis points higher than Q3 2021 [37][38] Business Line Data and Key Metrics Changes - Specialty Products & Technologies segment core revenue increased by 11.3%, driven by strong growth in premium implants and the Spark business, which grew over 20% year-over-year [39] - Equipment and Consumables segment core sales decreased by 4.7%, primarily due to a slowdown in equipment business volumes, while consumables business saw solid growth [42] - The implant-based tooth replacement business grew mid-single digits, with premium implants showing high single-digit growth [40] Market Data and Key Metrics Changes - Western Europe delivered core sales growth of over 9%, while North America was flat due to higher exposure to traditional imaging equipment [35] - The business in China grew by 9.2% year-over-year, reflecting a ramp-up in activity post-lockdown [36] - Emerging markets continued to grow nicely, up over 15% compared to Q3 2021 [36] Company Strategy and Development Direction - The company aims to partner with dental professionals to improve quality of life through digitization and personalized oral care [11] - Focus on embedding sustainable environmental, social, and governance (ESG) principles into the strategy, with a recent sustainability report highlighting progress [29][32] - The company is committed to transforming its portfolio by investing in fast-growing specialty businesses and enhancing digital capabilities [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the dental market despite macroeconomic uncertainties, including inflation and geopolitical risks [16][51] - The company anticipates continued core growth and profitability, reiterating guidance for mid-single-digit core growth and an adjusted EBITDA margin of 20% for the full year 2022 [51] - Management highlighted the need for productivity improvements in the dental industry, indicating a strong demand for digital transformation [67] Other Important Information - The company generated $19.7 million in free cash flow in Q3 2022, with over $500 million in cash on hand [49][50] - Adjusted EPS for Q3 was $0.47, compared to $0.45 in the prior year [38] - The company is focused on optimizing its organizational structure to improve customer experience and deal with macro uncertainties [21] Q&A Session Summary Question: Current dynamics and outlook for Q4 and 2023 - Management noted that Q4 trends are consistent with Q3, with stable patient volumes and a focus on productivity improvements despite macro uncertainties [63][66] Question: VBP impact in China - Management indicated that while VBP is expected to reduce prices significantly in the public sector, they anticipate volume increases for winning bidders [72][73] Question: European core growth and normalization - Management acknowledged that growth in Europe has been influenced by easy comparisons from last year, but they remain optimistic about future performance [80][81] Question: Pricing strategy in the current environment - Management highlighted that pricing has improved, with over 150 basis points of growth coming from pricing actions, and they expect this trend to continue [85][86] Question: Spark business and customer engagement - Management reported double-digit growth in active Spark customers and emphasized their focus on specialists while also expanding to traditional orthodontists [95][96] Question: Traditional imaging outlook - Management noted that traditional imaging revenue is stable but facing challenges due to supply chain issues and macroeconomic factors, leading to a strategic deemphasis on certain geographies [120][124]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights ($ in millions) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $568.5 | $1,073.6 | | Total current assets | $1,366.0 | $1,835.8 | | Goodwill | $3,399.6 | $3,132.0 | | Total assets | $6,411.9 | $6,574.2 | | **Liabilities & Equity** | | | | Short-term debt | $579.3 | $432.4 | | Total current liabilities | $1,258.3 | $1,208.2 | | Long-term debt | $851.6 | $883.4 | | Total stockholders' equity | $3,957.9 | $4,058.0 | | Total liabilities and stockholders' equity | $6,411.9 | $6,574.2 | - Total assets decreased slightly from **$6.6 billion** at year-end 2021 to **$6.4 billion**, primarily due to a significant reduction in cash and cash equivalents, partially offset by an increase in goodwill from acquisitions[12](index=12&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Statement of Income Highlights ($ in millions, except per share amounts) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Sales | $631.1 | $607.3 | $1,908.3 | $1,857.1 | | Gross Profit | $364.7 | $356.3 | $1,108.6 | $1,083.3 | | Operating Profit | $74.5 | $81.7 | $231.2 | $260.1 | | Net Income | $47.6 | $92.9 | $169.6 | $254.7 | | Diluted EPS from Continuing Operations | $0.28 | $0.45 | $0.92 | $1.25 | - Sales increased for both the three and nine-month periods ended September 30, 2022, compared to the prior year, but operating profit and net income declined, indicating pressure on margins and increased expenses[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Nine Months Ended ($ in millions) | Activity | Sep 30, 2022 | Oct 1, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $72.4 | $225.6 | | Net cash used in investing activities | $(656.2) | $(25.9) | | Net cash provided by (used in) financing activities | $80.8 | $(467.4) | | **Net change in cash and cash equivalents** | **$(505.1)** | **$(250.1)** | - Cash from operating activities significantly decreased to **$72.4 million** in the first nine months of 2022 from **$225.6 million** in the prior year period[22](index=22&type=chunk) - Investing activities saw a large cash outflow of **$696.2 million** for acquisitions[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, business segments, acquisitions, discontinued operations, debt, and segment performance - The company operates in two segments: Specialty Products & Technologies (dental implants, orthodontics) and Equipment & Consumables (digital imaging, restorative materials)[26](index=26&type=chunk) - In Q1 2022, COVID-19 lockdowns in China impacted operations, and the Russia-Ukraine conflict poses potential risks to business in the region and the global supply chain[31](index=31&type=chunk)[33](index=33&type=chunk) - On July 5, 2022, the company acquired Osteogenics for approximately **$128.2 million**; on April 20, 2022, it acquired Carestream Dental's Intraoral Scanner Business for **$580.3 million**[37](index=37&type=chunk)[38](index=38&type=chunk) - The company completed the sale of its KaVo Treatment Unit and Instrument Business on December 31, 2021, reclassifying its results to discontinued operations for all periods presented[29](index=29&type=chunk)[42](index=42&type=chunk) - As of September 30, 2022, total debt was **$1.43 billion**, including senior term loans and convertible senior notes, with convertible notes classified as short-term debt due to early conversion conditions being met[75](index=75&type=chunk)[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and nine-month financial performance, key trends, segment results, liquidity, and cash flow [Overview and Key Trends](index=33&type=section&id=Overview%20and%20Key%20Trends) Overview of dental product segments, key performance factors including COVID-19, geopolitical risks, foreign exchange, and acquisitions - The sale of the KaVo Treatment Unit and Instrument business is a strategic shift to focus on higher-growth, higher-margin segments, increasing the revenue mix of the Specialty Products & Technology segment to approximately **60%**[123](index=123&type=chunk) - COVID-19 related lockdowns in China impacted operations in Q1 2022, and the ongoing zero-COVID policy creates uncertainty[128](index=128&type=chunk) - Foreign currency exchange rates negatively impacted reported sales by **4.1%** in Q3 2022 and **3.2%** in the first nine months of 2022 due to the strength of the U.S. dollar[133](index=133&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q3 2022 sales grew, but gross and operating profit margins declined due to foreign exchange, acquisition costs, and inflation Sales and Core Sales Growth vs. Prior Year | Period | Total Sales Growth (GAAP) | Acquisitions Impact | Currency Impact | Core Sales Growth (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | **Q3 2022** | 3.9% | (3.1)% | 4.1% | 4.9% | | **9 Months 2022** | 2.8% | (1.3)% | 3.2% | 4.7% | - Gross profit margin for Q3 2022 decreased to **57.8%** from **58.7%** in Q3 2021, primarily due to unfavorable foreign exchange rates, acquisition-related inventory costs, and inflation[147](index=147&type=chunk)[149](index=149&type=chunk) - Operating profit margin for Q3 2022 decreased to **11.8%** from **13.5%** in the prior year, driven by lower gross margins, higher sales and marketing expenses, and acquisition-related costs[153](index=153&type=chunk) [Results of Operations - Business Segments](index=40&type=section&id=Results%20of%20Operations%20-%20Business%20Segments) Specialty Products & Technologies saw strong sales growth but lower margins; Equipment & Consumables sales declined but margins improved Specialty Products & Technologies Performance (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Sales | $395.4M | $363.4M | | Sales Growth (GAAP) | 8.8% | - | | Core Sales Growth (Non-GAAP) | 11.3% | - | | Operating Profit Margin | 15.8% | 16.9% | Equipment & Consumables Performance (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Sales | $235.7M | $243.9M | | Sales Growth (GAAP) | (3.4)% | - | | Core Sales Growth (Non-GAAP) | (4.7)% | - | | Operating Profit Margin | 19.0% | 18.6% | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity changed with decreased operating cash flow and substantial cash used for acquisitions, reducing cash and equivalents - Net cash provided by operating activities decreased to **$72.4 million** for the nine months ended Sep 30, 2022, compared to **$225.6 million** for the same period in 2021[181](index=181&type=chunk)[183](index=183&type=chunk) - Cash used in investing activities was **$656.2 million**, driven by **$696.2 million** spent on acquisitions, partially offset by proceeds from the KaVo business sale and settlement of derivatives[181](index=181&type=chunk)[185](index=185&type=chunk) - As of September 30, 2022, the company held **$568.5 million** in cash, with **$476.9 million** held outside the United States[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures since the 2021 Annual Report on Form 10-K - There were no material changes to the company's quantitative and qualitative disclosures about market risk during the quarter ended September 30, 2022[198](index=198&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[199](index=199&type=chunk) - No material changes were made to the company's internal control over financial reporting during the third quarter of 2022[200](index=200&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings from the 2021 Annual Report on Form 10-K - There have been no material changes to legal proceedings from the company's 2021 10-K[202](index=202&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors highlight adverse effects of current global economic conditions, including inflation and slowing growth - The company updated its risk factors to emphasize the adverse effects of current global economic conditions, such as sustained inflation, rising interest rates, and slowing economic growth[205](index=205&type=chunk) - Economic pressures can reduce demand for products (especially discretionary dental procedures), increase price competition, cause supply interruptions, and increase the difficulty of collecting accounts receivable[205](index=205&type=chunk)[208](index=208&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the period - None[207](index=207&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) Index of exhibits filed with Form 10-Q, including agreement amendments, CEO/CFO certifications, and XBRL data - Exhibits filed include amendments to the Master Sale and Purchase Agreement with Planmeca, CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files[213](index=213&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2022, reported sales increased by 1.3% to $645.8 million, negatively impacted by 3.6% due to foreign currency exchange rates, while acquisitions contributed 0.9% growth [30] - Core sales growth was 4% year-over-year, reflecting solid performance in the Specialty Products and Technology segment, offset by weakness in the equipment and consumables segment [31] - Adjusted gross margin was 58.7%, an increase of 40 basis points compared to the prior year, while adjusted EBITDA margin was 19.7%, also up 40 basis points year-over-year [34][20] Business Line Data and Key Metrics Changes - The Specialty Products and Technologies segment saw core revenue increase by 9.6%, driven by strong growth in implants and the Spark clear aligner business [37] - The combined orthodontic businesses grew 17% year-over-year, with Spark revenue accelerating significantly [38] - The equipment and consumables segment experienced a core sales decrease of 4.7% compared to Q2 2021, with declines in both developed and emerging markets [41] Market Data and Key Metrics Changes - Western Europe delivered core sales growth of 11%, while North America increased by 0.5%, impacted by higher exposure to infection prevention and modest destocking [32] - The business in China was down 0.3% year-over-year due to extended lockdowns, but activity ramped up quickly as Shanghai reopened [32] - Emerging markets outside of Russia and China grew approximately 20% compared to Q2 2021 [33] Company Strategy and Development Direction - The company aims to partner with dental professionals to improve patient quality of life through digitization and personalization of oral care [10] - Strategic priorities include accelerating growth, expanding operating margins, and transforming the portfolio through disciplined capital deployment [51][52] - The acquisition of Carestream Dental's iOS business has been successfully integrated, with plans to enhance the DEXIS scanner within the DTX platform [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges from persistent inflation, supply chain issues, and geopolitical risks impacting the second half of 2022 [50] - Despite these challenges, management remains confident in the long-term resilience of the dental market and expects mid-single-digit core sales growth for the full year [51] - The company is focused on maintaining a strong balance sheet and ample liquidity to pursue additional growth opportunities [48] Other Important Information - The company generated $11.9 million of free cash flow in Q2 and ended the quarter with over $500 million in cash [48] - The DEXIS iOS solution received a 2022 Red Dot Design Award, highlighting its design and functionality [26] - The company signed a long-term agreement with dentalcorp, enhancing its position in the implant market in Canada [18] Q&A Session Summary Question: Market volumes outlook in different areas - Management sees a positive overall outlook, with strong patient traffic and continued investment from dental professionals despite macroeconomic concerns [58] Question: Distributor destocking impact - Distributor inventory has reduced by 25% to 30% as they prepare for an uncertain environment, impacting sales [65] Question: Updated guidance for the second half - Management expects mid-single-digit growth in the second half, driven by recovery in China and destocking normalization [71][72] Question: Trends throughout Q2 - Q2 was not linear due to the Shanghai lockdown, with a stronger performance in the last weeks of the quarter [80] Question: IOS business integration progress - The IOS business is expected to contribute $50 million to $60 million in sales for 2022, with strong growth potential anticipated [94]

Second Quarter 2022 Earnings Presentation August 3, 2022 Forward Looking Statements Certain statements in this presentation are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, am ...